Former USA Capital Officer Sentenced for Fraud Conviction
Las Vegas, Nev. – Joseph D. Milanowski, 48, former officer of the real estate development investment company USA Capital, was sentenced today by Chief U.S. District Judge Roger L. Hunt to 12 years in prison and ordered to pay $86.9 million in restitution to over 1,000 victims, for his guilty plea to one count of wire fraud announced Daniel G. Bogden, U.S. Attorney for the District of Nevada.
Milanowski's sentence included enhancements because the loss was greater than $50 million, and because the defendant abused a position of private trust to facilitate the commission of the offense. Milanowski was allowed to self-report to federal prison by August 6, 2010, at noon, but must continue to cooperate with the government and U.S. Bankruptcy trustees during that period of release.
Milanowski was the President and de facto Chief Operating Officer of USA Commercial Mortgage Company, which did business as USA Capital from 1998 through April 2006. USA Capital raised money from investors to loan to developers for the construction of real estate. In May 2000, USA Capital created the Diversified Fund to make secured loans to the developers and to pay the investors interest on the loans. Milanowski and others represented to investors that all of the loans made by the Diversified Fund would be secured by first deeds of trust. Investors were also advised that no loans would be made to company insiders, that no loans larger than $20 million would be made once the Diversified Fund reached a certain value, that no loan would exceed 15 percent of the value of the Fund, and that the Fund would not loan more than 25 percent of its funds to a single borrower.
On about April 15, 2002, Milanowski created a loan known as the "10-90 Loan" which he used to fund private developments and investment projects for himself and other company insiders and affiliates. From about March 27, 2003, to about November 12, 2004, Milanowski transferred approximately $22 million to 10-90 Inc. and to another entity he controlled to fund his own development projects. Milanowski and others concealed the existence of the 10-90 Loan from investors until September 30, 2005, when Milanowski included the 10-90 Loan on a list of the Diversified Fund's loan portfolio in which he claimed that the 10-90 Loan was secured by three master-planned communities in Southern California when he knew that the loan was not secured by three communities. When USA Capital Mortgage Company and the Diversified Fund filed for bankruptcy on April 13, 2006, Milanowski had caused the Diversified Fund to attribute $55.9 million of its principal to the 10-90 Loan. The investigation of USA Capital is ongoing.
The case was investigated by the FBI, and prosecuted by Assistant United States Attorneys Daniel R. Schiess and Roger Yang.
This prosecution is sponsored by President Barack Obama's Financial Fraud Enforcement Task Force, http://www.justice.gov/opa/pr/2009/November/09-opa-1243.html. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.